The power sector outlook in the country remains strong due to high electricity demand, continued policy support and a sustained capital expenditure cycle across generation and transmission infrastructure, highlighted a report by HDFC Securities.

According to the brokerage, the sector continues to benefit from resilient power demand despite concerns around the phased impact of El Nino. It said the strong demand environment is expected to support higher electricity generation, better realisations and improved financial performance for power generation companies.

Infrastructure expansion and capacity additions to drive growth

The report highlighted that the rapid expansion of power infrastructure, commissioning of transmission assets and capacity additions across renewable energy, thermal power, nuclear power and transmission networks are likely to remain key growth drivers for the sector.

“We remain constructive on the Utilities, supported by sustained electricity demand, a strong policy thrust, and an ongoing CapEx upcycle across generation and transmission,” HDFC Securities said in its report.

Strong demand drives record peak power consumption

The brokerage noted that electricity demand remained strong during May. Power demand grew 11.2 per cent year-on-year to 164.5 billion units (BUs), largely driven by severe heat conditions across the country, which led to higher power consumption.

The report further stated that rising temperatures linked to El Nino pushed peak power demand to an all-time high of 270.8 GW in May 2026, representing a 17 per cent year-on-year increase.

Thermal performance improves, renewables gain share

Higher demand also improved the operational performance of thermal power plants. Thermal plant load factor (PLF) rose to 72.2 per cent in May 2026 from 67.9 per cent in May 2025.

Meanwhile, conventional power generation, including thermal, nuclear, hydro and imports from Bhutan, increased by 2.9 per cent year-on-year to around 137 billion units. At the same time, renewable energy sources continued to increase their contribution towards meeting India’s electricity requirements.

Selective investment approach advised despite bullish outlook

The report added that ongoing investments in generation and transmission infrastructure are expected to provide long-term growth opportunities for companies operating across the power value chain.

However, while maintaining a bullish stance on the sector, the brokerage advised investors to remain selective in their investment approach.

According to the report, execution of projects, sustainability of demand growth and regulatory developments will remain important factors to monitor going forward.

Published on June 23, 2026